Wednesday, July 14, 2010

What is Your Client Retention Budget?

If your business is doing any business, you have a marketing budget.

And most or all of that budget is devoted to client acquisition -- search engine marketing, Yellow Pages or Angie's List, print advertising, direct mail, media relations, etc.

But. Do you have a client retention budget?

If not, create one. Today. Find the money somewhere. Anywhere.

Because, as we know (and forget), it's more profitable and easier to sell to existing clients than new ones.

More profitable because you don't have to buy advertising to attract them (they're already in your database). And easier because you don't have to work as hard to sell them (they've already given you their money once).

Resolve to spend a fixed percentage of your marketing dollars on retaining clients today, so you can sell more to them tomorrow.

Here's an easy way to do it. Say: "Thank you."

When was the last time you got a thank-you letter from a company after giving them your money? Can't remember? Good. See how easy it is for you to stand out and generate good will among your clients?

Here, by the way, is a link to the only thank-you letter I've received from a company in at least two years. Do you think they're going to get repeat business and referrals from me?

A heartfelt "thank you" is all you need to say in your letter (sorry -- email doesn't count). But you can go further in your message, by doing the following:
  • reinforce why it was a good idea to buy from you in the first place -- sell your company after the sale to reduce buyer's remorse and returns/refunds;
  • anticipate frequently asked questions (FAQ) and tell clients how they can get post-sale service, to automate your post-sale support while increasing their satisfaction;
  • ask for referrals. Say: "What one person do you know that we could help?"
Mailing a thank-you note after the sale can nip most service problems in the bud, while turning satisfied customers into raving fans who recommend your business to others.

In article in Entrepreneur Magazine, Frederick Reichheld, of Bain & Company, found that
... customer retention has a powerful effect on profits. Surveying 100 companies in two dozen industries, Reichheld consistently found that the longer a company keeps its customers, the more money it makes. One auto-service firm made three times as much profit from fourth-year customers as from first-year customers. Reducing that company's customer defections by just 5 percent increased overall profits by 30 percent, Reichheld says.

Customer retention also helps overall growth. For a typical company that loses 15 percent to 20 percent of customers annually, Reich-held says, cutting defections in half will double its growth rate without having to introduce new products or develop new markets.
Thanking your clients is more than good manners. It's the first step in your all-important efforts of delighting and retaining them. Which sets your business up for reliable, long-term profits in the future.

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